Are the Twin or Triple Deficits Hypotheses Applicable to Post-Communist Countries?

Abstract

This study empirically examines the validity of the twin and triple deficits hypotheses using bootstrap panel Granger causality analysis and an annual panel data set of six post-communist countries (Russia, Poland, Ukraine, Romania, the Czech Republic, and Hungary) from 1994 to 2012. Our findings, based on panel data analysis under cross-sectional dependence and country-specific heterogeneity, support neither the twin deficits hypothesis nor its extended version, the triple deficits hypothesis, for any of the countries considered. In other words, we find no Granger-causal relationship between budget deficits and trade (or current account) deficits or among budget deficits, private savings-investment deficits, and trade deficits.

Testing the Validity of the Triple Deficit Hypothesis for Nigeria

“…Countering these findings, Domenech et al (2000) tested the triple deficit hypothesis on 18 OECD economies between 1962 and 1994 and found that the cause of the fiscal deficit was not the saving deficits. This is in line with Sen and Kaya (2018) who posited that there was invalidity of the twin or triple deficit hypotheses on six post-communist countries between 1994 and 2012, which agreed with the Ricardian Equivalence Hypothesis and was contrary to conventional approaches implying an absence of the triple deficit hypothesis.…”

“…One leading key factor receiving considerable attention is the effect of macroeconomic uncertainty on the fiscal deficit, and current and financial account deficits of balance of payment process. Studies like Kuijs (2006), Bachman (1992), Tang (2014), Sen et al (2014), Sürekçı (2011), Akbas and Lebe (2016), Sen and Kaya (2016), and Shruti et al (2017) are among the few empirical studies that have tested the validity of extension of the twin deficit hypothesis, called the triple deficit hypothesis. Some of these studies are time-series based, while others are both time-series and cross-section based (panel data analysis).…”

“…Contrary to these studies, Domenech et al (2000) found an absence of a causal relationship between fiscal deficit and saving deficit using panel VAR analysis between 1962 and 1994, establishing that the Ricardian Equivalence Hypothesis was valid in these countries contrary to conventional approaches and concluded that the triple deficit hypothesis was not valid. Furthermore, Sen and Kaya (2018) carried out a study on the validity of the triple deficit hypothesis in six post-communist countries using data between 1994 and 2012 with a bootstrap panel Granger causality estimation, and concluded the invalidity of the twin or triple deficit in their models. Gruber and Kamin (2007) using panel data analysis attempted to establish the determinants of the trade account deficit in 61 countries for the years 1982-2003.…”

Üçüz Açik Hi̇potezi̇ni̇n Geçerli̇li̇ği̇ne İli̇şki̇n Panel Veri̇ Anali̇zi̇

“…Basit Keynesyen modeldeki açık ekonomideki milli gelir dengesi ikiz ve üçüz açık hipotezlerinin teorik altyapısının başlangıç noktasıdır (Şen & Kaya, 2016). Modelde açık ekonomide t dönemi için GSYİH (1) numaralı denklemde ifade edilmiştir:…”

“…Tablo 1, ülke grubu özelinde yapılan çalışmaları göstermektedir. Tablo 1'de de görüldüğü üzere, Şen & Kaya (2016), Çoban & Balıkçıoğlu (2016Çoban & Balıkçıoğlu ( ), Özdemir vd. (2014 tarafından yapılan ampirik çalışmalarda üçüz açık hipotezinin geçerli olmadığı sonucuna ulaşılırken, Balan (2016) çalışmasında BRIC ülkelerinde cari açık üzerinde bütçe açığı ve tasarruf açığı etkili olduğu ancak MINT ülkelerinde tasarruf açığı ve cari açık arasında ve tasarruf açığı ile bütçe açığı arasında tek yönlü nedensellik ilişkisine rastlamıştır.…”